Question

Brokeback Towing Company is at the end of its accounting year, December 31, 2017. The following data that must be considered were developed from the company's records and related documents: a. On July 1 2017 a three-year Insurance premium on equipment in the amount of $1,800 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1 b. At the end of 2017, the unadjusted balance in the Office Supplies account was $2.000. A physical count of supplies on December 31, 2017 indicated supplies costing $900 were still on hand c On December 31, 2017 YY's Garage completed repairs on one of Brokeback's trucks at a cost of $1.200. The amount is not yet recorded. It will be paid during January 2018 d in December, the 2017 property tax bil for $3200 was received from the city. The taxes, which have not been recorded, will be paid on February 15, 2018 e On December 31, 2017, the company completed the work on a contract for an out of province company for $17,900 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction On July 1, 2017 the company purchased a new hauling van Depreciation for July to December 2017, estimated to total $3.750. has not been recorded 9. As of December 31, the company owes interest of $1000 on a bank loan taken out on October 2017. The interest will be paid on September 30, 2018, when the loan is repaid No interest has been recorded yet n. The income before any of the adjustments or income taxes was $50,000. The company's federal income tax rate is 30 percent. Compute adjusted income based on all of the preceding information, and then determine and record income tax expense Required: 1. Give the adjusting journal entry required for each transaction at December 31, 2017. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field) View transaction list Journal entry worksheet 7 > On July 1, 2017, a three-year insurance premium on equipment in the amount of $1,800 was paid and debited in full to Prepaid Insurance on that date Coverage began on July 1. <P 4 of 5 Next > e DOLL

Answer 1

Adjusting entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Insurance expenses (1800*6/36)	300
	Prepaid insurance				300
	(for insurance expired)
b.	Office supplies expense		1100
	Office supplies (2000-900)			1100
	(for supplies used)
c.	Repairs and Maintenance expense	1200
	Accounts payable				1200
	(for repairs made)
d.	Property tax expense		3200
	Accounts payable				3200
	(for taxes due)
e.	Accounts receivable			17,900
	Service revenue				17,900
	(for service revenue earned)
f.	Depreciation expense		3750
	Accumulated depreciation			3750
	(for depreciation charged)
g.	Interest expenses			1,000
	Interest payable				1,000
	(for interest expense due)
h.	Income tax expense			15,000
	Income tax payable (50,000*30%)		15,000
	(for tax due)
Req 2.
Computation of Under/Over-statement of Net Income:
a. Insurance expense not receorded			300
b. Supplies expenses not recorded			1100
c. Repairs and maintenance expense not recorded		1200
d. Property tax expenses not recorded			3200
e. Service revenue not recorded				-17900
f. Depreciation expense not recorded			3750
g. Interest expenses not recorded			1000
h. Income tax expense not recorded			15000
Over-statement of Net Income				7650
Answer is $ 7650 over-stated